I agree that whether it's a good idea depends on that answer. I'm rejecting a stronger statement you made, about how any government program is suspect "given you have to pay for it".
In the cases of education and healthcare, it seems to me that there has been a decrease of governmental involvement (compared to other nations, if you like, or even internally to our own nation in the case where bankruptcy discharge became disallowed) that should not have happened, and that decrease is costing dramatic amounts of money. You can't tell whether a policy is a good idea just based on whether it expands or contracts the role of government. We can be suspicious of government under-involvement too.
Back to fixing the education more-cost-less-results spiral. I agree that what this proposal will do will depend on the specifics. But this proposal, if it helps, probably will do so only accidentally, because it doesn't seem to be attempting to do any such thing. It's trying to address the cost to students, and that's all.
To address the overall cost problem, it has to do something to incentivize universities to be more efficient at delivering education to students. If it was something like "If you've got an e-learning way to get to a full diploma, we'll pay you (the university) enough that you should be making decent money at it, and we'll give the student a computer and broadband if they don't have it", that would incentivize the university to have such a program, because money. And it could scale easier than in-person, if implemented well. Even better, you could now have competition between universities based on quality of instruction vs. odds of passing.
I'm sure there are holes in that approach, but I think it's at least somewhat in the right direction...
Education is in a death spiral where costs increase and effectiveness decreases. Do you think throwing more money at the universities will make that better, or worse?